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Tips to reduce your home loan interest rate
18 Aug - 2019

Tips to reduce your home loan interest rate

Home loan interest is one of the most confusing factors for most of the persons. Moreover, the obsession by paying back of the money interest will be more. These are the few following tips to reduce your home loan interest rate.

  • Reducing the number of installment days/months.
  • Choose the right option between EMI or number of installment days/months.
  • Investing money through mutual funds.
  • Better to pay another EMI on the same installment month.

Reduce the number of installment months:

where this factor is directly linked with the every month installment (EMI). Explained by

Example1:

Loan amount- 2000000 INR;

Months-240;

Interest per annum - 9%;

Interest per month - 0.0075;

EMI- [LA*IPM*(1+IPM)^M]/[(1+IPM)^M-1]= 17,994.52INR;

Total amount need to paid is = EMI *months = 4,318,684.8INR;

Interest paid = total amount – loan amount=2,318,684INR;

Reduce the months to 150 and calculate the EMI with the same formula;

Emi=15000INR;

NOTE- when the number of installment months reduced similarly EMI and total amount need to pay will also be reduced.

Choose the right option between the EMI or number of days

When you have the bulky amount of price and need to reduce the loan interest rate you might have the two-way to reduce it. One by reducing the every month installment rate and reduce the number of installment months/days.

NOTE- As example 1 reflects the second most tip. By reducing the number of installment days/months, the total amount also reduces.

Investing money through mutual funds

even though the investing money through the mutual funds is a bit time consumable thing but it efficiently depends on the person and the period he had invested money.

Example 2- monthly investment-2200;

No. of months -240;

Monthly return – 0.009488793;

Yearly return - 12%;

Money returns of AFTER 240 months - 20,23,686.18INR

NOTE- From the example1, The interest paid amount for the respective bank had deducted by the earning return from the mutual funds.

Better to pay another EMI on the same installment month

Banks rules and regulations in terms of loans and installments might be oddly different with each other but the extra money that Is payable on the same installment month/day will reduce the one's loan investment rate. But long term repayment of the housing loan consists of a lot of tax benefits by the government. Mostly the interest rate of banks prescheduled the interest rate at the top of the months rather than the principal amount that needs to pay. This kind of payment is a smart choice to reduce the burden of loan repayment issues. The shorter-term loan will be cleared with less burden comparatively with years of loan repayment. As explained in the example 1, although the number of installment days/months reduces, the total amount need to paid and that reduces the interest rate of the loan where that reduces the burden of repayment.

These simple tricks and tips that mentioned above will help to reduce the home loan interest rate and get rid of all sort of obsessions.

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